The Supreme Court of Appeal has upheld a ruling clarifying that retirement funds have 12 months from the date of awareness of a member's death to trace dependants and distribute benefits, ensuring accountability in fund management.
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The Supreme Court of Appeal (SCA) has upheld a ruling by the Pension Funds Adjudicator that a retirement fund has 12 months from the date it becomes aware of a member’s death - not from the date of death itself - to trace dependants and distribute a death benefit.
The SCA dismissed, with costs, an appeal against a judgment of the Mpumalanga Division of the High Court.
The South African Retirement Annuity Fund had challenged the Adjudicator’s ruling of June 23, 2023, which found in favour of complainant Sophia Viljoen. The Adjudicator criticised the fund for failing to conduct a proper investigation and instead allocating the benefit to the deceased’s estate “through the back door”.
The Adjudicator held that the 12-month period in section 37C of the Pension Funds Act relates to tracing beneficiaries and not to a general payment deadline. Because tracing beneficiaries requires an investigation, the obligation arises only once the fund becomes aware of the member’s death.
“It is clear that the fund will not know if there are dependants or not without conducting an investigation,” the Adjudicator said, finding the fund’s decision unlawful.
The High Court agreed with this interpretation and rejected the fund’s argument that section 37C(1)(a) and (c) of the Pension Funds Act requires payment to the estate if no dependants are traced within 12 months of the member’s death.
Marius Viljoen died intestate on December 26, 2019. He left a retirement annuity benefit of R52,120.53 and had not nominated a beneficiary. His estate was valued below the statutory threshold of R250,000, meaning no executor was appointed.
Mrs Viljoen, who relied solely on a state old-age grant, became aware of the benefit only in March 2022 after being informed by a broker. She submitted a claim, which the fund rejected. The fund then decided to pay the benefit into the estate, despite the estate not having been reported to the Master of the High Court.
Mrs Viljoen lodged a complaint with the Pension Funds Adjudicator, who set aside the fund’s decision. The High Court later confirmed that ruling, prompting the fund to appeal to the SCA.
The SCA said the key issue was whether the 12-month period begins on the date of death or on the date the fund becomes aware of the death.
The court held that the process of identifying and verifying dependants can only begin once the fund has knowledge of the member’s death. To comply with section 37C, a fund must identify dependants, determine an equitable distribution of the benefit, and decide on payment. These obligations cannot be fulfilled if the fund is unaware of the death.
The SCA acknowledged that section 37C could be interpreted in more than one way but found the fund’s interpretation inconsistent with the purpose and spirit of the Act.
The court said the fund’s interpretation would undermine its obligation to trace dependants and investigate dependency. It could allow a fund to take no action until the 12-month period had expired and then rely on its lack of knowledge of the member’s death.
The SCA found that the Adjudicator’s interpretation aligned with the purpose of the Act and that the fund’s approach could prejudice dependants by allowing funds to avoid their responsibilities.
The court also ruled that payment into a deceased estate is permitted only after all statutory steps to trace dependants and nominees have been exhausted.
The appeal was dismissed with costs.
Pension Funds Adjudicator Lebogang Mogashoa said: “We note the judgement handed down by the SCA on May 28, 2026, in the court challenge brought against our earlier ruling from 2023.
“The judgement reaffirms our interpretation that the 12-month period in terms of section 37C commences from the date the fund is notified of the death of the member, and not from the actual date of the death of the member. We believe the judgement provides clarity on this important point of law”.
PERSONAL FINANCE